Industrial & Commercial Bank of China Ltd. and Agricultural Bank of China Ltd. lowered rates on some deposit products, easing pressure on profit margins following earlier cuts to lending rates.
ICBC cut rates on deposits of two years or more by 20 basis points to 1.45%-1.8%, according to the bank’s website. Rates for time deposits of up to one year were cut by 10 basis points. Annualized rates for demand deposits will drop by five basis points. The changes are effective from Thursday.
Agricultural Bank of China also cut rates on deposits of two years or more by 20 basis points, according to the website of the bank, one of the nation’s largest state-owned lenders. Rates for time deposits of up to one year were cut by 10 basis points.
The move follows a cut to Chinese benchmark lending rates earlier this month, part of an effort to boost the economy with cheaper credit. A reduction in deposit rates reduces a bank’s funding costs, offsetting lower interest rates on loans.
Chinese banks implemented a broad reduction in deposit rates in late 2022, the first such move since 2015, after authorities urged them to boost lending. They cut deposit interest three more times last year.
Despite the cuts to deposit rates, the industry’s net interest margins have been falling and hit a record low of 1.54% at the end of March. The margin has been below 1.8%, a level regarded as the minimum needed to maintain reasonable industry profitability, for the past five quarters.
With assistance from Li Liu.
This article was generated from an automated news agency feed without modifications to text.
